Logitech's Google TV debacle drags down earnings

Logitech last night reported a disappointing quarter and named an interim CEO. The company's Google TV experiment is one of the reasons why.

Granted, Logitech can't blame Google TV completely. After all, the company is in the crosshairs as PC sales remain anemic. Logitech makes peripherals that take a hit when PCs aren't flying off the shelves.

But Logitech's well-documented Google TV woes aren't helping matters much. About a year ago, Logitech made a big bet on Google TV to be a digital home player. Its flagship product was the Revue (CNET review). Now the company has too much Revue inventory and not enough buyers. The solution: Logitech is dropping the price from $249 to $99 and hoping a new user interface can save the day. Remember when then-Google-CEO Eric Schmidt was yapping about how the TV would be just like your PC? Even Google fans like Sam Diaz went from calling it a revolution to a disappointment in a few months over Google TV and the Revue.

Oh well. Logitech reported a fiscal first quarter loss of $45 million on revenue of $480 million, up slightly from the previous year.

Let me begin with the Digital Home, specifically with the repricing of Logitech's Revue, or GoogleTV. We launched Revue with the expectation that it would generate significant sales growth in spite of a relatively high price point and the newness of both the Smart TV category and the underlying platform. In hindsight, there are a number of things we should have done differently, but let me be clear on one point. Engaging with Google was the right thing to do. It allows us to build a strong relationship with a technology leader, which promises to bear more fruit down the road, and to develop a thorough understanding of the emerging smart TV market.

Looking at $249 price points for Logitech Revue, it was clear to me that there was a significant gap between our price and the value perceived by the consumer. I felt it was critical that we eliminate the gap by lowering the price and making it easier for the consumer to focus on what I believe is an attractive value proposition. We obviously paid a significant price for this decision. But I am convinced this action will accelerate sales of Revue and allow us to move forward. Our commitment to an enthusiasm for the digital home opportunity is unchanged. We plan to participate in a variety of ways using harmony as the centerpiece of our strategy and focusing on smart TV, audio, and video products and solutions. We continue to believe that the digital home represents a strong growth opportunity for Logitech.

De Luca was pelted by analysts, who argued that Logitech mispriced the Revue from the very beginning.

De Luca said:

On Revue, what went wrong, what can I say? I think at the beginning we believed fully in the fact that the price point was justified, that the richness of the offer was such that the consumer would have seen that value. In truth, you're right, we were wrong. And partly due to the fact that GoogleTV has not yet fully delivered to its whole promises, witness the absence for now of an app market which I believe is a unique differentiator between GoogleTV and other competitive approach, as well some evolutions that are needed in content in UI. That said, I made the decision of cutting the price, or planning to cut the price, is pretty recent, and therefore I can say in summary that I agree with you. That we misvalued what the consumers saw in the box. That said, at $99 it's an incredibly appealing proposition. And if you add to that the incredible value of that plus our TV cam that would enable you to have a truly social video communication experience in your living room for $250 or less, it's unheard of. And I believe the consumers will see that.

De Luca followed up and noted that Google TV will get new software at the end of September with an app market. "It's a major update to the platform. It's what the platform should always have been, particularly the addition of the App Store for Android apps for the TV," he said. "The good news is that all these beautiful new things will run on the existing box."

We'll find out soon enough. Even at $99, the Revue has to compete with Roku and Apple TV at the same price.